PNB Vesper Life Sciences Pvt. Ltd. v. State of Kerala & Others

WP(C).No.20125 OF 2020 1 ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE SMT. JUSTICE P.V.ASHA** **TUESDAY, THE 27TH DAY OF OCTOBER 2020 / 5TH KARTHIKA, 1942** ## **WP(C).No.20125 OF 2020(M)** ## **PETITIONER/S:** **PNB VESPER LIFE SCIENCES PVT. LTD. WITH ADDRESS AT 5TH FLOOR, AMRITHA TOWERS, KPCC JUNCTION, MG ROAD, KOCHI-682 011, KERALA, INDIA, REPRESENTED BY ITS DIRECTOR, P.N.BALRAM, AGED 59 YEARS, S/O.NANU EZHUTHASSAN, RESIDING AT NO.4., NIRMALYAM, GREEN PARK, PENGAVU, THIRUVAMBADI P.O., THRISSUR-680 022.** ## **BY ADV. SRI.MILLU DANDAPANI** ## **RESPONDENT/S:** - **1 STATE OF KERALA REPRESENTED BY THE SECRETARY TO GOVERNMENT, DEPARTMENT OF CO-OPERATION, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695 001.** - **2 KERALA STATE CO-OPERATIVE BANK LTD. (NOW KNOWN AS KERALA BANK), HEAD OFFICE, PB NO.4, KAKKANAD P.O., KOCHI-682 030, REPRESENTED BY ITS GENERAL MANAGER.** - **3 KERALA STATE CO-OPERATIVE BANK LTD. (NOW KNOWN AS KERALA BANK), GROUND FLOOR NEAR METRO PLAZA, MARKET ROAD, ERNAKULAM, COCHIN-682 031, REPRESENTED BY ITS BRANCH MANAGER.** - **4 KERALA STATE CO-OPERATIVE BANK LTD., (NOW KNOWN AS KERALA BANK), THRISSUR REGIONAL BRANCH, REGIONAL OFFICE, SAHAKARNA SATHABDHI MANDIRAM, KOVILAKATHUMPADAM P.O., THIRUVAMBADI, THRISSUR-680 022, REPRESENTED BY TIS REGIONAL MANAGER.** - **5 THE CATHOLIC SYRIAN BANK LIMITED, REPRESENTED BY ITS SR.MANAGER, MG ROAD BRANCH, KPCC JN., KOCHI-682 011.** WP(C).No.20125 OF 2020 2 **BY ADV. SRI.N.RAGHURAJ BY ADV. SRI.MADHU RADHAKRISHNAN** ## **OTHER PRESENT:** **SMT.PRINCY XAVIER, GP** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 27.10.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** WP(C).No.20125 OF 2020 3 ## **P.V.ASHA, J.** **==> picture [204 x 2] intentionally omitted <==** ## **W.P(C) No.20125 of 2020** **--------------------------** Dated this the 27[th] day of October, 2020 ## **J U D G M E N T** The petitioner, which is a private company engaged in Biotechnology Research and Clinical Work, is aggrieved by the refusal on the part of the 2[nd] respondent-the Kerala State Co-operative Bank, to renew the counter bank guarantee in favour of the 5[th] respondent, based on which the 5[th] respondent is not extending the bank guarantee. 2. It is stated that on 01.10.2014, the petitioner has entered into an agreement with Biotechnology Industry Research Assistance Council (BIRAC), a Government of India enterprise, for a Biotechnology Partnership Programme for a research project having global importance. It is stated that the project has been extended as per Ext.P1 order dated 28.12.2016 for the phase 2 Project Implementation. It is stated that the project costs Rs.496 lakhs out of which petitioner's contribution is Rs.248 lakhs and the contribution of BIRAC is 124 lakhs as grant and 124 lakhs as loan. The petitioner submits that it develops molecules for treatment of various types of cancer and the latest one being developed is for treating coronavirus patients. It is stated that the petitioner is the only company in the world to launch clinical trials for Covid-19 treatment. WP(C).No.20125 OF 2020 4 3. It is stated that the petitioner company as well as its sister concern M/S. Cybele Herbal Laboratories Pvt. Ltd. had a banking relationship with the 2[nd] respondent Bank for a long time. In connection with the research project petitioner had approached the 2[nd] respondent and in order to credit the financial assistance from the Government of India through BIRAC it had opened a no-lien account. But since the Government of India insisted that accounts should be in Nationalised Banks or scheduled Banks it approached the 5[th] respondent. The 5[th] respondent agreed to provide Bank guarantee to the petitioner provided the 2[nd] respondent issues counter Bank Guarantee to it for equal amounts. It is stated that towards security for the same the petitioner had furnished 2 parcels of property having a total extent of 66 cents in Pudukkad, belonging to Sri.P.N. Balaram, the Director of the petitioner Company. It is stated that those properties were under mortgage with Kerala Financial Corporation for the Ezhuthassan Electronix which was under liquidation proceedings and Sri.Balaram was its Managing Director. The petitioner submits that though the liabilities with KFC were already settled, a release order was not issued because of the liquidation proceedings. It is also stated that the property was released to him based on Ext.P3 judgment dated 07.03.2012 in W.P. (C).No.1906 of 2012, in which this Court directed release of the document based on the undertaking of Sri.Balaram that he would discharge the liabilities, if any, in the event of any objection WP(C).No.20125 OF 2020 5 being raised by the official liquidator. The petitioner states that despite the liquidation ordered in 1996, no claim is raised so far and all debtors were cleared by the Company itself. It is also stated that there was no encumbrance also over the property at the time when the property was offered to the 2[nd] respondent Bank as collateral security for the counter bank guarantee. The petitioner states that the 5[th] respondent had issued a Bank guarantee in the name of the Managing Director of BIRAC for a sum of Rs.30,50,000/- on 10.06.2015 based on counter bank guarantee issued by the 2[nd] respondent and it was extended till 06.06.2021. The first bank guarantee issued on 29.08.2014 for a sum of Rs.49,60,000/- was extended from 24.08.2017 till 24.08.2020. Similarly, another bank guarantee issued on 24.05.2016 for a sum of Rs.52,90,000/ was renewed only upto 24.08.2020. The 5[th] respondent is not renewing it since the 2[nd] respondent is not extending the counter bank guarantee on the strength of the property given as collateral security saying that Ezhuthassan Electronix is in liquidation proceedings. The petitioner submits that as against the arbitrary approach the petitioner approached this Court in W.P.(C) No.16873 of 2020 and this Court had, as per interim order dated 24.08.2020, ordered that the petitioner would approach the 2[nd] respondent for a settlement. But the 2[nd] respondent continued to be adamant and passed Ext.P10 order without considering Ext.P3 judgment and stating that as per the valuation of the property it is less than the bank guaran- WP(C).No.20125 OF 2020 6 tee. The 2[nd] respondent refused extension of counter bank guarantee unless the petitioner provides encumbrance free collateral security with sufficient valuation and clears the loan accounts which are declared NPA. 4. According to the petitioner the action of the 2[nd] respondent is only on account of change in Management consequent to formation of Kerala Bank demanding other properties as security, raising frivolous and extraneous reasons, despite the customer relationship with the petitioner for a long period and deposit of Rs.15 crore with it as on 30.03.2019. Producing Ext.P12 valuation report the petitioner submits that the valuation done at the instance of the 2[nd] respondent is not correct and they only want to decline extension. 5. The petitioner submits that the denial of extension till 31.03.2020 would spoil the entire project and therefore the 2[nd] respondent should be directed to extend the counter bank guarantee. 6. The 2[nd] respondent, has filed a counter affidavit objecting to the very maintainability of the Writ Petition under Article 226 of the Constitution of India and stating the following on the contentions raised by the petitioner. 7. It is stated that when the petitioner informed the second respondent about the research project in association with Government of India through BIRAC with a financial assistance of Rs.2.4 crores from Government of India, 50% as grant and 50% as WP(C).No.20125 OF 2020 7 loan and they required bank guarantee for the same, the 2[nd] respondent had agreed for the same and a no lien account was opened in the name of the petitioner in order to credit the financial assistance extended to them. Since it was informed that Government of India insisted bank guarantee from nationalised or scheduled banks, the petitioner thereafter approached the 5[th] respondent. The 5[th] respondent agreed for providing the same in case the 2[nd] respondent provided counter bank guarantee for an equal amount. The 2[nd] respondent bank therefore issued counter bank guarantees to the tune of Rs.1,33,00000/- in 3 separate bank guarantees in favour of the 5[th] respondent in 2014/15 for a period of 3 years each. It is stated that on expiry of the 3 year period the Part Time Administrator of the Bank of the second respondent had renewed 2 bank guarantees (Rs.49,60,000/- and Rs.30,50,000/-) upto 24.08.2020 and 06.06.2021. The Bank guarantee for a sum of Rs. 52,90,000/- issued on 10.05.2019 was not renewed after its original period upto 09.05.2019. It is stated that 25.61 ares of property in Puthukad Panchayath in Trissur District in the name of M/s Ezhuthassan Electronix Pvt Ltd, purchased by one Mr.P.N. Balram, the Managing Director for the said Company, was furnished by the petitioner towards security for issuing the bank guarantee, in addition to a fixed deposit of Rs.13,40,000/-. It is stated that when the 3[rd] bank guarantee was due for renewal the bank had appointed a special team for inspection regarding the property given as security as it was un- WP(C).No.20125 OF 2020 8 derstood that certain proceedings including that for liquidation were going on against M/s.Ezhuthassan Electronics. It was found that liquidation of the said company was already ordered on 17.06.1998 and the proceedings are not finalised since the company did not remit the fee of Rs.1.5 lakhs for giving advertisement inviting the claims. Therefore, the 2[nd] respondent states that the petitioner had suppressed these facts from it when it approached the Bank in 2014. It is stated that the Directors or officers of a Company under liquidation are not entitled to furnish the property of such a company as security. Furnishing the details of amount due to the 2[nd] respondent Bank by M/s Cybelle Herbal Laborataries Ltd, the sister concern of the petitioner company as well as from the petitioner company as on October 2020, it is stated that the loan accounts of the petitioner as well as the sister concern of the petitioner company were declared as Non-Performing Asset in April 2019. Explaining these the 2[nd] respondent has stated that the counter bank guarantees were not renewed on valid reasons and it is not obliged to renew the counter guarantee putting its financial stability at peril. 8. Heard Sri. Millu Dandapani, the learned Counsel appearing for the petitioner, who explained the importance of the project having global importance especially at this point of time and the consequences the petitioner would have to suffer on account of the non-renewal of bank guarantee by the action of the 2[nd] respondent. He argued that an extension for a period upto WP(C).No.20125 OF 2020 9 31.03.2020 would enable him to complete the project successfully, based on which the entire world would be benefited. 9. On the other hand, Sri.Reghuraj the learned Counsel for the 2[nd] respondent, with the support of a series of judgments of this Court and that of the Apex Court argued that a Writ Petition against the 2[nd] respondent, that too, for extending/renewing the counter bank guarantee would not lie under Article 226 of the Constitution of India. The judgment of the larger Bench of this Court in _**Association of Milma Officers v. State of Kerala**_ : 2015(1) KLT 889, _**Rajendran M.M V Secretary Nayarambalam SC/ST Co-operative Bank Ltd**_ : 2015(2) KHC 455; _**Kasaragod Co-operative Educational Society Ltd No.C.904 V Registrar of Co-operative Societies General**_ : 2016(3)KHC 630; _**Meenachil Rubber Marketing and Processing Co-operative Society Ltd V Choondancherry**_ _**Service Co-operative Bank Ltd**_ : 2018(2)KLT SN 55 (case no.66) and the judgment dated 11.08.2020 in W.A.No.1018/2020: _**Y.Sleebachan V State of Kerala**_ : 2020 (5) KLT SN 2 were relied on. He also argued that on merits also the petitioner is not entitled to any relief, pointing out that the action of the Director or Managing Director of the Company to furnish the property of a company which was ordered to be wound up was contrary to the provisions contained in Section 283, 290 and 334 of the Companies Act. 10. I have considered the contentions raised on either side. The petitioner is seeking a direction to a Co-operative bank to extend the counter bank guarantee issued by it. The WP(C).No.20125 OF 2020 10 larger Bench of this Court has in _**Association of Milma Officers'**_ case held that a Writ Petition against a Co-operative Society would lie only if there is any statutory violation on its part or if there is a breach of public duty. In the present case, there is neither. 11. The 2[nd] respondent on reasons explained by them has found that counter bank guarantee cannot be given on the basis of the property which is offered as security and they do not intend to do any act at the risk of their financial stability. That cannot be a matter for interference of this Court. 12. In the judgment in _**Kasaragod Co-operative Educational**_ _**Society**_ 's case this Court considered a case where the petitioner sought for a direction to the respondent bank to extend a loan as the petitioner proposed. This Court found that there was no statutory violation in a commercial contract and that the Bank had only insisted on certain conditions for ensuring a safe recovery. It was also held that this Court cannot substitute the commercial wisdom or policy of the bank even if certain other banks have acted in the manner in which the petitioner wanted. In _**Meenachil Rubber Society's**_ case also the Division Bench of this Court held that a writ for refund of fixed deposit would not lie against the appellant society as it does not come under any of the exceptions laid down by the larger Bench. It was also held that an effective statutory remedy was available to the petitioner therein under Section 69 of the Co-operative Societies WP(C).No.20125 OF 2020 11 Act. In the latest judgment in _**Sleebachan**_ 's case the Division Bench, after considering a series of judgments of this Court and that of the Apex Court including the judgment in _**Mathew Ignitious v. Catholic Syrian Bank Limited**_ : 2020 (1)KLJ 132, _**Rajbir Surajbhan Singh v. Chairman, Institute of Banking Personnel Selection, Mumba**_ i: (2019)14 SCC 189, etc. held that the Federal bank is not performing any public duty. In that case the appellant, who is a PWD contractor, approached this Court aggrieved by the denial of insolvency certificate. 13. Petitioner in this case does not have a case that there is any statutory violation on the part of the 2[nd] respondent or that there is any breach of public duty involved in issuing counter bank guarantee. In the light of the aforesaid judgments, the Writ Petition can only be dismissed. Ordered accordingly. ## **Sd/-** ## **P.V.ASHA** rkc **JUDGE** WP(C).No.20125 OF 2020 12 ## **APPENDIX** ## **PETITIONER'S/S EXHIBITS:** **EXHIBIT P1 TRUE COPY OF THE EXTENSION AND ENHANCEMENT ORDER REF.NO.BT/BIPPO726/27/13-PHASE II DATED 28.12.2016 ISSUED BY BIRAC IN FAVOUR OF PETITIONER FOR BIPP PHASE 2 PROJECT IMPLEMENTATION.** **EXHIBIT P2 TRUE COPIES CERTAIN ARTICLES BASED ON THE PETITIONERS SCOPE OF WORK AND RELEVANCE.** **EXHIBIT P3 TRUE COPY OF THE JUDGMENT DATED 07.03.2012 IN WPC NO.1906/2012.** **EXHIBIT P4 TRUE COPY OF THE CERTIFICATE OF ENCUMBRANCE OF THE PROPERTY NO.15386/17 DATED 22.11.2017 RELATES TO SURVEY NO.133/6 OF THORAVU VILLAGE.** **EXHIBIT P5 TRUE COPY OF THE LETTER OF EXTENSION OF BANK GUARANTEE NO.CSB/ERNMG/OTW/249/2017-18 DATED 01.08.2018 ISUSED BY THE 5TH RESPONDENT.** **EXHIBIT P5 A TRUE COPY OF THE COUNTER GUARANTEE DATED 05.06.2018 BY ERNAKULAM DISTRICT COOPERATIVE BANK LTD. IN FAVOUR OF CATHOLIC SYRIAN BANK LTD.** **EXHIBIT P6 TRUE COPY OF THE LETTER OF EXTENSION OF BANK GUARANTEE NO.CSB/ERNMG/OTW/323-A/201718 DATED 24.08.2017 ISSUED BY THE 5TH RESPONDENT.** **EXHIBIT P7 TRUE COPY OF THE LETTER OF EXTENSION OF BANK GUARANTEE NO.CSB/ERNMG/OTW/11/2019-20 DATED 07.05.2019 ISSUED BY THE 5TH RESPONDENT.** - **EXHIBIT P8 TRUE COPY OF THE LETTER DATED 03.08.2020 SUBMITTED BY THE PETITIONER BEFORE THE GENERAL MANAGER, KERALA BANK, ERNAKULAM.** - **EXHIBIT P9 TRUE COPY OF THE LETTER DATED 21.08.2020 ISSUED BY THE 5TH RESPONDENT.** **EXHIBIT P10 TRUE COPY OF THE PROCEEDINGS OF THE MEETING OF THE KERALA BANK HELD ON 24.08.2020.** WP(C).No.20125 OF 2020 13 **EXHIBIT P11 TRUE COPY OF REPRESENTATION DATED 03.08.2020 SUBMITTED BY PETITIONER TO OFFICE LIQUIDATOR. EXHIBIT P12 TRUE COPY OF THE VALUATION REPORT NO.PV/65/20 DATED 21.08.2020 PREPARED BY A CHARTERED ENGINEER.** **EXHIBIT P13 TRUE COPY OF THE STATEMENT OF ACCOUNT OF THE PETITIONER FOR THE PERIOD FROM 15.03.2019 TO 10.04.2019 OF CANARA BANK. EXHIBIT P14 TRUE COPY OF THE LATEST CERTIFICATE OF ENCUMBRANCE DATED 25/09/2020 OF THE PROPERTY COMPRISED IN SY. NO. 133/6 OF THORAVU VILLAGE** **RESPONDENT'S/S EXHIBITS: EXHIBIT R2(a): TRUE PHOTOCOPY OF THE PARTICULARS OF M/S.EZHUTHASSANS ELECTRONIX PVT. LTD., UPLOADED IN THE WEBSITE OF THE REGISTRAR OF COMPANIES. EXHIBIT R2(b): TRUE PHOTOCOPY OF THE VALUATION REPORT DATED 09/12/2019.**